BANI WALID/SIRTE, Libya, Sept 19 France denied
on Monday that it had mercenaries in Libya, after Muammar
Gaddafi's loyalists said they had captured 17 foreigners -- some
British and French -- in the fight for a town still held by the
ousted leader's followers.

The claim by Gaddafi's spokesman Moussa Ibrahim that foreign
security personnel had been captured in the battle for the
pro-Gaddafi bastion Bani Walid could not be verified and no
immediate proof was presented.

It comes as the new authorities are facing stark reversals
on the battlefield and in the political arena.

Nearly a month after Gaddafi was driven from power, his
loyalist holdouts have beaten back repeated assaults by National
Transitional Council forces at Bani Walid and Gaddafi's home
city of Sirte. NTC fighters have been sent fleeing in disarray
after failing to storm Gaddafi bastions.

The NTC, still based in the eastern city of Benghazi, has
faced questions about whether it can unify a country divided on
tribal and local lines. A long-promised attempt to set up a more
inclusive interim government fell apart overnight.

"A group was captured in Bani Walid consisting of 17
mercenaries. They are technical experts and they include
consultative officers," Gaddafi spokesman Ibrahim said on
Syria-based Arrai television, which has backed Gaddafi.

"Most of them are French, one of them is from an Asian
country that has not been identified, two English people and one
Qatari."

French Foreign Minister Alain Juppe, in New York to attend a
U.N. meeting, told journalists: "We have no French mercenaries
in Libya."

The British foreign office said it had no information about
whether the report was true and Qatar's foreign ministry was not
available for comment. NATO, which is staging air strikes on
Gaddafi loyalist positions, says it has no troops on the ground
in Libya.

Western nations have sent special forces in the past, and
media have reported that private security firms have aided
anti-Gaddafi forces in training, target ting and with
leadership. Gulf Arab states have also sent trainers and arms.

Among the confirmed sightings of foreign security personnel
in Libya during the conflict, the head of a French security firm
was shot dead at a checkpoint in Benghazi in May, and British
special forces troops were held for three days by rebels in
March while escorting a spy trying to make contacts.

DEBACLE

The interim government's attempts to seize Bani Walid, 150
km (95 miles) southeast of Tripoli have become a debacle, with
forces repeatedly surging into the town only to be driven out by
its pro-Gaddafi defenders.

On Monday, NTC forces were unable to approach the northern
gate to attack the town because of heavy gunfire from Gaddafi
loyalists.

Fighters said on Sunday their plans had gone awry for tanks
and pickup trucks with rocket launchers to lead an attack. Foot
soldiers piled in first, only to be driven out.

"There is a lack of organisation so far. Infantrymen are
running in all directions," said Zakaria Tuham, a senior fighter
with a Tripoli-based unit.

Many fighters spoke of tension between units drawn from Bani
Walid itself and those from other parts of the country.

Some fighters openly disobeyed orders. In one incident, an
officer from Bani Walid was heckled by troops from Tripoli after
he tried to order them to stop shooting in the air.

NTC forces and NATO warplanes also attacked Sirte, Gaddafi's
birthplace, where assaults have been repelled. Hundreds of
families were fleeing the city on Monday as NTC forces rolled up
with huge rocket launchers and artillery.

Humanitarian groups have voiced alarm at reported conditions
in the besieged coastal city.

"There's no electricity, no phone coverage. Nothing,"
resident Ibrahim Ramadan said, standing by a car packed with his
family at a checkpoint. Interim government forces were handing
out juice to civilians and rifling through their belongings to
search for weapons.

Residents said homes had been destroyed and cars smashed to
pieces as disorder spread through the city.

"People are fed up. There are explosions going off
everywhere and you don't know where the bullets will come from
next," said Abubakr, a resident making his way out of the city.

"Look at this," he said, pointing to a bullet hole in his
windshield. "Bullets are coming down from above. People are just
firing randomly."

In Benghazi, interim Prime Minister Mahmoud Jibril failed to
name a new cabinet on Sunday when his proposals did not receive
full backing from all current members.

"We have agreed on a number of portfolios. We still have
more portfolios to be discussed," Jibril told reporters at a
news conference on Sunday.

Sources familiar with the negotiations said Jibril's own
role had been a sticking point. There was also disagreement
about whether it was right to form a transitional government
before declaring Libya "liberated", which NTC officials say can
only happen when all Gaddafi loyalists are defeated.

The political infighting reveals some of the fractures in an
alliance that was united in civil war by hatred of Gaddafi but
remains split among pro-Western liberals, underground Islamist
guerrillas and defectors from Gaddafi's government.

The NTC has its roots in Libya's east, but most of the
militiamen who finally succeeded in driving Gaddafi out of
Tripoli are from towns in the west. Fighters are organised by
home town into units with little overall coordination.

Nevertheless, many Libyans say they can tolerate confusion
among the new rulers as the price of being rid of Gaddafi, who
crushed all opposition during four decades of rule.

"The delay in the new government isn't important... We need
time to recover," engineer Mustafa Saab bin Ragheb told Reuters
in Tripoli's main Martyrs' Square, where traffic police in
crisply pressed which uniforms took up patrols on Monday for the
first time since Gaddafi's fall.

"Look, we finally got rid of that bloody monkey. We are
better than before. We will hang him and his sons, and then we
can breathe freely. It's too early for politics."
(Additional reporting by John Irish in New York, William
MacLean and Joseph Logan in Tripoli, Sherine El Madany east of
Sirte, Emma Farge in Benghazi, Barry Malone and Sylvia Westall
in Tunis and Juliane von Reppert-Bismarck in Brussels; Writing
by Peter Graff; Editing by Giles Elgood)

WASHINGTON, Dec 9 The U.S. Senate was preparing
to pass a government spending bill on Friday evening after
Democrats from coal states announced they would not risk a
government shutdown by continuing to delay the vote.

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